Deal-Making Continues to Slide in 2012Private equity (PE) continued to falter in 3Q 2012, with firms closing 362 deals totaling $59 billion. The quarter marked the third consecutive quarter of declines in PE activity and was the slowest quarter for deal-making by volume and capital invested since 2009. At the current pace, 2012 will be the slowest year for PE deal-making since 2009 and the second worst year since 2004. The PE industry continues to experience seismic shifts in the wake of the financial crisis. Dealmakers have maintained their heightened focus on smaller transactions, as deals of less than $50 million now account for more than half of deal flow. Conversely, mega-deals of more than $1 billion have represented their lowest proportion of capital invested in more than a decade. PE investors looking for reasons for optimism can turn to exits and fundraising, which have exhibited relatively strong performance so far this year. Capital exited slipped following a record-breaking 2Q, but the 143 deals executed in 3Q 2012 was a slight improvement and in line with the recent trend. In terms of fundraising, PE firms closed 28 funds with a total of $35 billion in 3Q 2012. While this represents a slight decrease from the previous quarter, 3Q still registered the third best fundraising total in the last three years. “While the PE industry continues to face many headwinds, the recent strength in exits and fundraising suggest that an increase in investment activity is imminent,” says Richard A. Martin, Jr., Senior Director at Merrill DataSite. “Investors have been reluctant to engage in large deals, but the risk of expiring capital commitments will compel firms to act.” Inside this report, PitchBook examines PE activity in 3Q 2012 and provides an outlook for the rest of the year, with an analysis of deal flow, exit activity, and fundraising. Here are some of the highlights: → → → → → PE firms closed 362 deals totaling $59 billion Deal flow decreased in all industries except Information Technology and Energy Deals of...